Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the long-term printing contract as a “contract of enterprise or services” under Quebec civil law, triggering the client’s unilateral resiliation rights in articles 2125 and 2129 C.C.Q.
• Scope of the client’s duty of good faith when exercising a discretionary right to terminate, and whether Yellow Pages Digital & Media Solutions Limited (YPG) abused its rights by launching an RFP and switching suppliers.
• Interpretation of article 2129(3) C.C.Q., specifically whether Quad/Graphics Inc. (Quad) could recover the capitalized value of price discounts, waived penalties and retroactive rebates as “any other injury” following lawful resiliation.
• Evidentiary weight of extensive negotiation records surrounding the Fourth Amendment, including emails and financial models, in showing whether the four-year extension of term was a core quid pro quo for Quad’s concessions.
• Treatment and reliability of the PwC forensic accounting report, which quantified Quad’s claimed $42.5 million loss based on assumptions provided by counsel rather than an independent damages assessment tied to the early termination.
• Quantum and basis of Quad’s recovery for unpaid invoices, including whether YPG must pay not only the principal sum but also legal interest and the additional indemnity under article 1619 C.C.Q. despite ultimately prevailing on the main damages dispute.

Facts of the case

Quad/Graphics Inc. (Quad), a large U.S.-based commercial printer, became the successor to Quebecor World Inc. under a Canada-wide printing agreement for Yellow Pages’ Canadian telephone directories. The agreement, originally effective from October 6, 2006, granted Quebecor, and later Quad, exclusive rights to print, bind and deliver all of Yellow Pages’ business and consumer directories throughout Canada. Over time, the contract was amended four times as industry conditions and the parties’ financial situations evolved. YPG, a subsidiary of Yellow Pages Limited listed on the Toronto Stock Exchange, ultimately succeeded Yellow Pages Group Co. as the client under the agreement. The contract was governed by Quebec law and qualified as a contract of enterprise or services, bringing it within articles 2125 and 2129 of the Civil Code of Québec. It was common ground at trial that the legal conditions for YPG to exercise unilateral resiliation under article 2125 C.C.Q. were satisfied, and that neither party had validly waived that right.

The printing agreement and key contractual clauses

The original 2006 agreement made Quebecor the exclusive printer of YPG’s Canadian directories and set a fixed term to December 31, 2020. Detailed price schedules applied per directory, with all manufacturing costs included except freight of finished directories, which remained YPG’s responsibility. A system of annual manufacturing price adjustments was tied to the Canadian Consumer Price Index, and as of 2013, YPG undertook to pay “Foregone Volume Guarantee Penalties” if its annual printed page volumes dipped below 24 billion. The supplier provided the paper at first, with YPG bearing the cost, and committed to use “reasonable commercial efforts” to produce at its closest Canadian facilities, absorbing any additional cost if other plants were used. Over time, subsequent amendments shifted production locations, including allowing production in the United States, changed freight allocations, and updated price schedules. Importantly, the agreement also contained a contract termination clause stating that, “[i]n addition to any other rights and remedies available to it,” either party could terminate in certain circumstances, a formulation the court held did not amount to a clear and unequivocal waiver of YPG’s statutory right to resiliate under article 2125 C.C.Q.

Negotiation of the Fourth Amendment and overall concessions

The industry context deteriorated sharply after 2007 with the rise of digital alternatives, leading to declining print volumes and falling market prices for directory printing. YPG’s revenues dropped, and by late 2011 and early 2012 it was facing serious liquidity issues and exploring debt restructuring, including potential insolvency protection. At that point YPG owed Quad over CAN$10 million in outstanding invoices, and the parties acknowledged that Quad’s contract prices were significantly above 2011 market rates while YPG was unlikely to meet the minimum volume guarantees going forward. Against this backdrop, the parties negotiated a Fourth Amendment, signed on July 6, 2012. The amendment involved a complex package of concessions and counter-concessions. Quad agreed to eliminate the minimum volume guarantee and related penalties, grant substantial price discounts averaging 45.25 per cent, and provide retroactive rebates on directories issued from January to June 2012. In exchange, YPG was to pay an upfront CAN$10 million, settle all outstanding invoices, prepay future directories, assume responsibility for freight, provide paper, and, as a standalone clause, extend the agreement’s fixed term from December 31, 2020 to December 31, 2024. Quad later characterized its “Overall Concessions” as consisting of the discounted prices, retro-rebates, and waived minimum volume penalties.

Events leading to termination and the RFP

After Quad acquired Quebecor and took on the agreement in 2011, it soon sold all its Canadian printing plants, shifting production to U.S. facilities. Subsequent operational changes, including closures of Quad’s Loveland and Hazelton plants, progressively concentrated YPG’s directory production at Quad’s Waukee, Iowa facility. This location increased freight complexity and cost, particularly for deliveries across Canada from a U.S. Midwest hub far from main freight routes, and made it difficult to arrange cost-effective backhaul transport. The cost picture further worsened when the U.S. Department of Commerce imposed significant tariffs (later reversed) on imports of Canadian groundwood paper, directly affecting the paper YPG supplied to Quad’s U.S. facilities. To rationalize its distribution model, YPG decided in 2018 to shift delivery of directories to Canada Post, which required that directories be “mail prepped” to its specifications. While YPG approached Quad to provide these preparation services, Quad’s pricing for mail prep was high enough to erase much of the savings from using Canada Post. Because mail preparation is rarely priced in isolation, YPG launched a confidential by-invitation RFP in October 2018 for combined printing and mail preparation services. Two competitors were invited; the winning bidder, Transcontinental (TC), had Canadian facilities and offered significantly better pricing and streamlined mail-prep capability. YPG advised TC in early January 2019 that it had been selected and, on February 25, 2019, TC and Quad (in the judgment’s wording) executed a contract for printing YPG’s directories and preparing them for Canada Post. On February 27, 2019, YPG sent Quad a termination notice invoking article 2125 C.C.Q., citing rising tariff risks, higher freight and distribution costs tied to Quad’s U.S. location, and increased expenses associated with Canada Post’s standards. YPG offered Quad transitional work on certain scheduled directories to facilitate a smooth handover and help mitigate Quad’s volume loss. Quad rejected the termination’s legal basis, asserted bad faith, and immediately ceased work and withheld completed directories unless YPG rescinded its resiliation, which it did not. YPG then turned to its new contractor to handle urgent work, and refused to pay certain invoices and other amounts claimed for surplus materials and repurposed equipment.

Allegations of bad faith and the court’s analysis

Quad alleged that YPG had acted in bad faith both during the negotiation of the Fourth Amendment and in the lead-up to termination. It argued that YPG had effectively bargained for a long-term exclusive supply relationship to 2024, obtained substantial concessions in return, and then opportunistically walked away before the extended term even began, without warning Quad or giving it a chance to match competing bids. Quad also pointed to YPG’s secret RFP process and refusal to pay for work done as further evidence of bad faith. The court framed the analysis under articles 6, 7 and 1375 C.C.Q. (good faith and abuse of rights) and article 2125 C.C.Q. (unilateral resiliation of a contract of enterprise or services). It emphasized that the right of a client to resiliate under article 2125 is discretionary and inherently prejudicial to the other party, but that this prejudice alone does not make the exercise abusive. To prove bad faith or abuse, Quad had to show either that YPG acted with the intent to harm, or that it committed a gross or distinct fault in exercising its termination right that produced harm beyond what normally flows from lawful resiliation itself. After reviewing the evidence, including YPG’s evolving cost pressures, freight and tariff risks, and attempts to work with Quad on mail preparation and logistics, the court found that YPG’s decision to launch an RFP and select a Canadian supplier reflected a legitimate effort to protect its commercial interests, not a scheme to injure Quad. The court also rejected Quad’s argument that the mere existence of a fixed term to 2020, later extended to 2024, or the grant of exclusivity, operated as a clear and unequivocal waiver of YPG’s article 2125 rights. The termination clause itself expressly preserved “any other rights and remedies,” reinforcing that the statutory resiliation right had not been renounced.

Damages claim under article 2129(3) C.C.Q.

While Quad eventually conceded that YPG had lawfully exercised its right to resiliate under article 2125 C.C.Q., it sought to recover $42,536,515 in damages as “other injury” under article 2129(3) C.C.Q. Quad’s theory was that the Overall Concessions — the 45.25 per cent price reductions, the retroactive rebates from January to June 2012, and the waived Foregone Volume Guarantee Penalties — represented a financial sacrifice it made in 2012 specifically to secure the four-year Extension of the Term to December 31, 2024. Because YPG terminated the agreement before the extension period began, Quad argued it was deprived of the benefit of that bargain and should be “made whole” by recapturing the net capitalized value of those concessions, less the capitalized value of YPG’s $10 million upfront payment. Quad anchored its quantification in a forensic accounting report from PwC, which calculated a capitalized value of $65,574,515 for the Overall Concessions, then deducted a capitalized $23,038,000 for the upfront payment to arrive at the claimed $42,536,515 net figure. The court first set out the framework for damages under article 2129 C.C.Q. in the context of unilateral resiliation of a contract of enterprise or services. It stressed that “any other injury” in article 2129(3) must be interpreted restrictively so as not to erase the substance of the client’s resiliation right. The jurisprudence limits recoverable injury to losses actually caused by the premature termination itself, such as certain sunk expenses or loss of anticipated profit on work already performed, but it excludes future lost profits for the unperformed remainder of a lawfully resiliated contract. Applying this restrictive lens, the court examined whether, as a factual matter, the Overall Concessions were truly granted in exchange for the Extension of the Term. Negotiation records, internal emails, and financial models from late 2011 to mid-2012 showed that the parties focused heavily on the upfront payment amount, freight allocation, price reductions, waiver of volume guarantees, payment of arrears, prepayment for future directories, and supply of paper. The extension to 2024, by contrast, surfaced late in the talks, originated from YPG, and was accepted by Quad essentially without negotiation or separate financial modeling. There was no contemporaneous evidence that Quad regarded the extension as a make-or-break condition or that it adjusted its concessions because of it. The court therefore found that the Overall Concessions were not made “to secure” the Extension of the Term in the way Quad had suggested. Even more fundamentally, Quad’s damage theory sought to unwind the Fourth Amendment as though YPG’s lawful resiliation were tantamount to a contractual default. That approach would have effectively treated YPG like a breaching party subject to the general damages regime, rather than a client exercising a statutory right under article 2125. The court concluded that Quad’s Damage Claim did not qualify as “any other injury” resulting from the early termination as contemplated by article 2129(3) C.C.Q. and dismissed that component of the action.

Unpaid invoices, interest and costs

Separate from its large damages claim, Quad also sought payment of $346,900.03 for unpaid services rendered, representing the value of directories printed and delivered before the resiliation, together with interest and the additional indemnity from September 12, 2019. In March 2025, YPG’s counsel advised that YPG intended to pay this principal amount plus legal interest from September 12, 2019 to March 28, 2025 (for a total payment of $442,986.58 held in trust), while disputing some specific invoices tied to directories Quad had printed but refused to release. YPG asked the court to deny the additional indemnity under article 1619 C.C.Q., arguing that Quad’s overall claim had been vastly exaggerated and that the unpaid invoices represented only a small fraction of the litigation. The court, however, distinguished between Quad’s ambitious article 2129(3) damages theory and the narrower entitlement to be paid “the value of the work performed before the end of the contract or before the notice of resiliation” under article 2129(1) C.C.Q. It held that the amount relating to unpaid directories was clearly owed as of resiliation, that YPG’s withholding of payment placed it in breach of its obligation to pay for work already completed, and that Quad was therefore entitled not only to the principal and legal interest, but also to the additional indemnity under article 1619 C.C.Q. With respect to the expert evidence, the court was critical of the PwC report, noting that PwC had been instructed to assume Quad’s legal theory of damages rather than independently assessing injury caused by the termination. PwC used a high capitalization rate, ignored some concessions YPG had made, and did not opine on damages actually resulting from early resiliation. This, along with a counter-report from Accuracy attacking PwC’s methodology, led the court to give the PwC analysis limited weight. Ultimately, all reserved objections that had not been argued at the hearing were dismissed.

Ruling and overall outcome

In its formal disposition, the Superior Court dismissed Quad’s re-modified originating application in part, rejecting entirely the $42,536,515 damages claim advanced under article 2129(3) C.C.Q. and finding no bad faith in YPG’s decision to resiliate or its use of a confidential RFP process. The court ordered YPG to pay Quad $346,900.03 in damages corresponding to unpaid invoices for work performed, together with interest at the legal rate and the additional indemnity under article 1619 C.C.Q. calculated from September 12, 2019 to March 28, 2025. The remainder of Quad’s action was dismissed, and all unargued objections were rejected. On costs, the court awarded legal costs, including expert costs, against Quad, reflecting that YPG was the substantially successful party overall. Accordingly, while Quad obtained a limited monetary recovery for work already done, YPG prevailed on the core issues of liability and quantum; the total amount ordered in favour of the successful party (YPG) consists of its recoverable legal and expert costs, but the exact monetary value of those costs is not specified in the judgment and therefore cannot be determined from the decision itself.